The end of the year is just around the corner, and that means it’s time to think about year-end tax deductions! These strategies can help lower what you owe, and they’re easy to use. Let’s make the IRS give you a break this tax season! 😄
1. Prepay Some Expenses 🕒
What it is: Pay ahead for certain expenses and deduct them now.
If you’re on a cash basis for tax purposes, you can prepay for certain business expenses like rent, insurance, or vehicle leases and take the deduction this year. Cash-basis taxpayers recognize expenses when they actually pay, so prepaying by December 31, 2024, allows you to count those expenses as deductions for 2024.
Example: If you pay $3,000 per month in rent, you could prepay $36,000 (12 months) before December 31 and deduct the full amount for 2024!
Pro Tip: Make sure you get proof of mailing just in case the IRS ever asks. This strategy isn’t available for accrual-basis taxpayers, who recognize expenses when they’re incurred rather than paid. 📬
2. Delay Sending Bills 📨
What it is: Hold off on sending invoices until after the new year.
For businesses on a cash basis (meaning you only pay tax on what you’ve received), try waiting until January to send out December invoices. This way, you delay receiving income until 2025, pushing that income (and taxes) into the next year!
Example: Jake the dentist normally sends out bills every week. This December, he waits until January to send them out, which helps reduce his 2024 taxable income. 🦷💸
3. Buy Office Equipment 🖥️
What it is: Use Section 179 to write off 100% of qualifying purchases.
Buying new or used equipment? You can write off the full cost for 2024 if you place the items in service by the end of the year. Think computers, desks, machinery – even certain vehicles!
Example: Sarah buys a new office computer for $1,000. By deducting it now, she lowers her taxes for 2024. 🖥️💰
4. Use Your Credit Cards Correctly 💳
What it is: Charge business expenses on your credit card before December 31.
For sole proprietors or single-member LLCs, the date you charge something on your credit card is the date it counts for deductions – even if you don’t pay it off right away.
Example: Let’s say you charge $500 for office supplies on December 30, 2024. That $500 counts as a 2024 expense, even if you pay the bill in January. ✏️📅
5. Don’t Worry About “Too Many Deductions” 📉
What it is: Claim every legitimate expense without fear.
Some business owners worry that too many deductions will raise “red flags” with the IRS. But here’s the truth: if the deductions are legitimate, don’t hesitate! More deductions mean more savings.
Example: John’s business had a rough year, and his expenses are higher than his income. This creates a Net Operating Loss (NOL), which can offset future income, meaning potential tax savings down the road!
6. Improve Your Property 🏢
What it is: Qualified Improvement Property (QIP) can be deducted immediately.
If you made improvements to the interior of a business building, you might be able to take a big deduction. The trick? Make sure the improvements are “placed in service” by December 31 to qualify.
Example: Lucy added new lighting to her retail shop in November. By placing it in service in
2024, she can take advantage of immediate tax deductions. 💡
Wrapping It Up
These strategies are simple but can make a huge difference in lowering your tax bill! Taking time to plan your year-end moves can help you save big – and make tax season a lot less stressful. 😌
Comments